Does Gutting Norwegian Salmon in an Indonesian Bonded Area Violate the Korea-EFTA FTA Direct Consignment Principle? Released

If you intend to import Norwegian salmon into Korea after processing it (e.g., removing internal organs to maintain freshness) in an Indonesian bonded area, it is assessed that applying preferential tariff benefits under the Korea-EFTA FTA will be difficult due to a violation of the Direct Consignment Principle. As explained below, the process of removing internal organs in Indonesia exceeds the scope of "simple preservation operations" permitted under the agreement.

The Direct Consignment Principle and Its Exceptions

To qualify for preferential tariff rates under a Free Trade Agreement (FTA), goods must not only meet the Rules of Origin but also comply with the Direct Consignment Principle. This principle mandates that originating goods must be transported directly from the exporting country to the importing country without alteration or processing. The purpose is to prevent the substitution of goods or changes in origin during transit through a third country.

However, exceptions are made for cases involving transit through third countries due to geographical reasons or transport requirements. Under the Korea-EFTA FTA (Annex 2 'Rules of Origin', Article 3), such transit is permitted provided that the goods remain under customs control and undergo no operations other than unloading, reloading, or any operation designed to preserve them in good condition. Permissible preservation operations are strictly limited to:

• Unloading and re-loading
• Separation of consignments
• Operations to maintain physical condition such as ventilation, spreading out, drying, cooling, removal of damaged parts, and simple sorting

The critical interpretation criterion is that operations must not modify the essential characteristics of the goods, grant new properties, or generate added value (processing). Only operations intended to prevent contamination, delay deterioration, or maintain the original form are allowed.

Assessment of the Gutting Process

Although the "removal of internal organs" (gutting) mentioned in your inquiry is intended to maintain freshness, it is considered Primary Processing rather than simple preservation. Removing organs from fish changes the original form of the commodity and is viewed as a preparatory step for consumption. This constitutes an alteration of the essential components of the goods, exceeding the minimum preservation work allowed under the agreement.

Therefore, if this operation is performed in an Indonesian bonded area, the salmon will be deemed to have violated the Direct Consignment Principle. Even if the goods remain under customs control, the nature of the work disqualifies the goods from retaining their originating status. Consequently, the import will likely be subject to the standard Most Favored Nation (MFN) tariff rate rather than the Korea-EFTA preferential rate.

Professional Recommendations

As a Customs Broker, I recommend the following actions:

• Utilize the Advance Ruling System: For a definitive authoritative interpretation, apply for an "Advance Ruling on Origin" with the Korea Customs Service. Receiving an official response prior to importation is the safest method to mitigate risk.
• Re-evaluate Processing Stages: If the FTA tariff benefit is essential for your business model, consider completing the gutting process within Norway (the country of origin) and transporting the finished goods directly to Korea. This eliminates the risk of violating the Direct Consignment Principle.
• Strict Management of Transport Documents: When goods transit through a third country, always ensure you have documentation proving the goods remained under customs control (e.g., Non-Manipulation Certificate, Through Bill of Lading, or confirmation from the transit country's customs authority).

In conclusion, since removing internal organs is considered processing rather than simple preservation, applying the Korea-EFTA agreement appears difficult under the current plan. We strongly advise consulting with trade experts or utilizing the Advance Ruling system before proceeding.